Given Below Are Mario's Capital Gains and Losses for Two

question 52

Multiple Choice

Given below are Mario's capital gains and losses for two consecutive years.What is the effect of the capital gains and losses on Mario's taxable income for each year?
First Second
Year Year

• A)$(9,000)$ 9,000
• B)$ 3,000 $ 1,000
• C)$(3,000)$ 3,000
• D)$(3,000)$(3,000)
• E)$(3,000)$ -0-

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Definitions:

Prepayments

Payments made in advance for goods or services, which are recorded as assets on the balance sheet until the corresponding goods or services are received.

Unearned Revenue

Money received by an entity for a service or product yet to be delivered or performed.

Adjusting Entry

A journal entry made in accounting records to update the balances of accounts at the end of an accounting period before financial statements are prepared.

Revenue and Expense Account

Accounts in the general ledger that track the income earned and expenses incurred by a business during a given period, critical for determining net income.